Sunday, March 27, 2016

Eric Tymoigne — Money and Banking-Part 10: Monetary Creation by Banks

The last three posts have explained how the operations of banks are constrained by profitability and regulatory concerns, and how banks operate to bypass these constraints. It is now time to go into the details of how banks get involved into providing credit and payment services to the rest of the economy.…
New Economic Perspectives
Money and Banking-Part 10: Monetary Creation by Banks
Eric Tymoigne | Associate Professor of Economics at Lewis and Clark College, Portland, Oregon; and Research Associate at the Levy Economics Institute of Bard College

2 comments:

Matt Franko said...

"explained how the operations of banks are constrained by profitability and regulatory concerns, and how banks operate to bypass these constraints."

But then he says here in this piece:

"The total amount of bank account is $104.93 so A now needs to get $10.49 of reserves on its balance sheet if the reserve requirement ratio is 10%. "

So now he has them complying?

Which one is it?

It cant be both... either they seek to comply or they dont seek to comply...

How do these people's brains work?

Modern Money Theory, Videos from L&C Students said...

Hi Matt,
The point of the example is to show how a bank would get the reserves it needs supposing it could not bypass the requirement. Sweep accounts are a means to bypass the requirement or at least limit its impact.
Hope that helps.
Eric